10 things you need to know about pet insurance

We're a nation of pet lovers, with 22% of households owning a dog and 18% having a cat, according to research by the Pet Food Manufacturers Association. And for many, our four-legged friends are very much part of the family, so it can be devastating if something happens to them.

Yet rising veterinary costs and tight household finances mean that sometimes families are forced to make the heart-wrenching decisions because they can't afford veterinary costs. This is where pet insurance can come in and there are different levels of cover available so you can get a policy to suit your budget.

Pet insurance is often seen as a non-essential type of insurance, but many pet owners who have it would argue to the contrary. The average claim for veterinary costs for treatments for a dog, according to Sainsbury's Finance, is £416, while the typical cat claim is £328. And if something serious happens, or your pet develops a long-term illness such as diabetes, the cost of treatment can escalate substantially, so insurance may be more cost-effective than you realise.

Veterinary costs account for the majority of pet insurance claims and with the cost of treatment often running into thousands of pounds it's a really important element of cover.

However, there are huge differences between policies in the level of protection you get so it's important to bear this in mind when comparing quotes. When it comes to insurance for cats and dogs, the maximum you'll get paid out towards veterinary fees is £7,500 per year. The minimum is around £1,500, so there's quite a big variation.

It is worth noting that these levels are per condition, not a total amount you can claim in vet's bills per year. So, for example, if your pet was unfortunate enough to be involved in an accident for which treatment was required and also became ill with something else during the policy term, they would be classed as two separate conditions and you would be able to claim up to the maximum capped amount for both.

Most standard pet insurance policies will only cover vet's fees per condition for a 12-month period. Consequently, if your animal requires regular treatment you'll have to pay for it yourself after the first year and no other insurer will cover it because it will be classed as a pre-existing condition.

However, some policies offer lifetime cover. This will cost a bit more as it will cover the cost of treatment on an ongoing basis. There will be a yearly cap on the amount you can claim per condition and you'll need to stick with the same insurer to ensure cover for that ailment is maintained, so you might not benefit from the most competitive premium. Nevertheless, this could be a price worth paying if you would otherwise be forking out hundreds of pounds a month for ongoing treatment.

3. Excesses

As with car and home insurance policies, there will be an excess to pay if you make a claim. Excesses vary from £40 or £50 to more than £100, so this is something to watch out for as it could have an impact on which policy you go for.

The excess is not the only thing you might have to pay for in the event of a claim. Veterinary fees have risen considerably over recent years and an increasing number of policies also require you to pay a percentage of the vet bills over and above the excess. This can change depending on the age of your pet. With younger animals it's usually about 10%, but it can be 20% with older animals (usually those over the age of nine).

4. How to claim

In the event of a claim, you should be able to download a claims form from your insurer's website. Alternatively, you can ask for one to be posted to you.

If you are claiming for veterinary costs, your vet will probably offer to complete the relevant section of the form and you will be able to include every consultation and all treatment relating to the condition you are claiming for.

You may have to pay the costs upfront and then claim the money back through the insurer, although many vets will allow you to defer the bill until the insurer has paid out, which can be useful if your cashflow is tight.

5. Why age matters

Just as humans are more likely to require medical treatment the older they get, so too are animals. Consequently, the cost of pet insurance increases as your animal ages. It used to be hard to get insurance for cats and dogs over the age of nine. That is no longer the case, although the cost is likely to jump.

For example, cover with More Than's standard Pet Saver policy would cost £9.93 a month for a three-year-old Labrador, but £16.30 a month for a nine-year-old Labrador.

While the age of your pet affects the price of insurance, so too does the breed. Moggies and mongrels are not only cheaper to buy but also cost less to insure than their pedigree cousins. There are a number of reasons for this.

From a medical perspective, pedigree dogs and cats are more likely to require veterinary treatment because of the smaller gene pool they are bred from. However, they will also be more attractive to thieves, so there is a greater risk of them being stolen.

7. Life is valued

Many pet insurance policies also include an element of life cover, which will pay out if your animal dies prematurely (this is usually classed as animals under the age of eight) or vanishes either because it is lost or stolen.

If your pet does disappear, you may also be able to claim towards costs you incur trying to find it through advertising and even offering a reward for its safe return.

8. Protect your finances against others

Personal liability is another aspect of many pet insurance policies. If you've got an indoor cat, it may be unlikely that you'll even need to claim on this element of cover but if you are the owner of a boisterous dog that injures another person or animal, or damages someone else's property, it could come in handy. Personal liability will cover compensation you have to pay out resulting from something your pet has done.

9. Holiday cancellation

If you have to cancel your holiday or come home early because your pet disappears, is injured or becomes ill, pet insurance might pay out. This will depend on the policy - not all include this cover.

10. Emergency care

As is probably becoming apparent, pet insurance covers far more than veterinary fees. If you are unexpectedly rushed into hospital and there is no one at home to look after your pet, you can claim towards the cost of kennel or cattery fees.